The NAB share price is a buy after the RBA rate hike – UBS

UBS is optimistic about the potential of this business.

| More on:
Bank building with the word bank in gold.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The National Australia Bank Ltd (ASX: NAB) share price has recently been named as the top pick among the major ASX bank shares by UBS.

UBS recently said in a note that NAB is its top pick, followed by Westpac Banking Corp (ASX: WBC), ANZ Group Holdings Ltd (ASX: ANZ), and Commonwealth Bank of Australia (ASX: CBA).

However, despite noting that the ASX bank share sector delivered a mid-teen total shareholder return (TSR) for investors in 2025 and that it's not expecting positive returns for the sector in 2026, UBS sees the NAB share price as a pleasing opportunity that could deliver a double-digit return.

Why is this a good time to invest?

UBS identified "select opportunities" in certain names, which include NAB. In the note, it upgraded NAB from a neutral rating to a buy.

The broker thinks there's potential for NAB's earnings per share (EPS) to rise with the Reserve Bank of Australia (RBA) cash interest rate forecast to increase by 50 basis points in 2026.

The RBA just hiked by 25 basis points, and UBS is suggesting there could be another one later this year.

Those rate hikes could contribute to the NAB net interest margin (NIM) and revenue performing better than expected by other analysts across the market. The NIM measures a bank's lending profitability, including the loan rate and the cost of funding those loans (with savings accounts, term deposits, transaction accounts, and so on).

The broker also suggested that loan growth could be stronger than the market is expecting:

Core earnings may also benefit from higher-than-expected loan growth, while banks are actively managing persistent cost pressures, which are ~+6.0% on an underlying basis.

UBS also noted that it upgraded its view on the NAB share price because of structural growth in business banking. Almost half of NAB's valuation, in the broker's view, is tied to a "market-leading" business and private banking segment, which has defended its profitability and supports group return on tangible equity (ROTE) of around 12.5%.

Competition and cost inflation

UBS did warn that competition could be a factor during the year, while certain costs may increase during the period. It said:

We expect competition in the Aussie banking sector to grow further in 2026, particularly in managing deposits, especially if rates rise. Controlling costs… will be critical, with tech spend considered essential. At the same time, wage inflation and shifts in workforce composition are driving staff expenses higher (+5.0%).

NAB share price target

UBS currently has a price target of $47 on the ASX bank share. That implies a possible 11% rise from where it is today over the next 12 months. Plus, the dividends can also be added in to that possible return – this is up to the discretion of the board of directors.

Overall, UBS sees a positive outlook for the NAB share price.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Bank Shares

Bank building with the word bank in gold.
Bank Shares

Here's the earnings forecast out to 2029 for CBA shares

This is how the bank’s earnings could progress in the coming years.

Read more »

Red sell button on an Apple keyboard.
Bank Shares

Sell alert! Why this expert is calling time on Westpac shares

A leading investment analyst forecasts mounting headwinds for Westpac shares.

Read more »

A woman wearing a yellow shirt smiles as she checks her phone.
Bank Shares

Westpac vs CBA shares, which is the better buy?

If I had to choose one Australian bank today, I’d rather own quality than chase yield.

Read more »

A man in a suit smiles at the yellow piggy bank he holds in his hand.
Bank Shares

What to expect from the Commonwealth Bank half-year result

Could Australia's largest bank disappoint in February?

Read more »

A woman with red lipstick and tattoos pulls a face as though the situation is not looking good.
Bank Shares

ASX bank shares: One I'd buy and one I'd avoid

Here's my view.

Read more »

A man sits cross-legged in a zen pose on top of his desk as papers fly around his head, keeping calm amid the volatility.
Bank Shares

Don't buy CBA shares until this happens

This bank has a big announcement scheduled for next week...

Read more »

View from below of a banker jumping for joy in the CBD surrounded by high-rise office buildings.
Bank Shares

3 reasons to buy NAB shares in 2026

The banking giant is still a good buy in my eyes.

Read more »

Nervous customer in discussions at a bank.
Bank Shares

What should you do with your CBA shares in 2026?

The business is still excellent, but the valuation leaves much less room for upside.

Read more »